Individual Retros: Reduced refunds are likely under L&I’s proposed changes

The Department of Labor and Industries (L&I) has proposed changes to the insurance tables that will reduce refunds for more than 80% of individual retros in Washington state.

Are you one of them?
 

In our experience, most companies choose to participate in an individual retro for two primary reasons:

• They believe that they can outperform the expectations of L&I and pay less premium over time.
• They prefer to bear all the risk in order to gain all the reward versus the safety that often comes in a retro group environment.

Unfortunately, consistently running a high performing individual retro is subject to changes from L&I. The proposed changes will dramatically change the retro landscape. Three things will happen:

• The cost of lower single loss limits will increase significantly, opening up retros to either increased insurance charges, or increased claims costs. Both of which reduce refunds.
• The cost of the claims administration expense will increase, compressing break even loss ratios and making it harder to earn refunds.
• More restrictive plan design options will reduce flexibility and the ability to control outcomes.

The bottom line? The proposed changes make it harder for individual retros, especially programs with under $1 million in premium, to continue to earn refunds. L&I’s own internal analysis shows a negative impact for 81% of individual retro programs.

Today, these are “proposed” changes from L&I. If approved, the changes are scheduled to become effective October 1, 2023. L&I will provide an updated rulemaking timeline at the quarterly Retro Advisory Committee meeting in May. Should these changes be finalized for the October renewal, groups will begin to feel the refund impact at first adjustment in 2025.  

If you have any uncertainty regarding how these changes will impact your program, it’s important to review and evaluate your individual retro plan design now. We can help and are happy to do so. After receiving your approval to run the numbers, we will provide you with an analysis, articulation of your options and our recommendations. You don’t have to figure this out alone.

Contact me today to get started: danb@vigilant.org

Dan Beaty
Vigilant VP of Workers' Compensation